■ Accounting
Continued From Page 20 subject to the New Jersey surtax . The New Jersey surtax is an additional 2.5 percent tax on top of ordinary tax rates for taxable income over $ 1M . Of course , we are careful that if we advise a client to accelerate income , we aren ’ t disqualifying them from taking advantage of the Employee Retention Credit . Every client will have to be handled differently , as there is no blanketed approach and likely won ’ t be until we have some certainty about the future of the tax code .
MSPC By Len Sprishen , J . D ., LL . M ., Tax Counsel
For our clients operating overseas through controlled foreign corporations , we are stressing how critical it is to plan now for adjusting their operating model to reflect the anticipated increase in the tax rate on any global intangible low-taxed income earned by those foreign subsidiaries . We are also advising all our business clients that because of the expected tax rate hikes across the board ( e . g ., a proposed 28 percent rate for C corporations ), they should consider pushing significant deductible expenses into future years . On the state side , planning for pass-through entity ( PTE ) taxes , such as the ones enacted by New Jersey , New York and a few other states , has become particularly important . Since the IRS has agreed that partnerships and S corporations may claim entity-level deductions for income taxes paid under state laws , and because the individual partners and shareholders of such entities are granted a corresponding credit or an exemption under these new taxing regimes , a viable workaround to the $ 10,000 limitation on state and local tax deductions imposed by the 2017 Tax Cuts and Jobs Act now exists , so we are urging many of our passthrough clients and their owners to analyze how they might benefit from paying PTE taxes .
“ For clients who had net operating losses in 2020 , forgoing the carryback claim and carrying the losses forward could be more tax beneficial assuming cash flow is not an issue .”
Sax LLP By Shivani Jain , CPA , MST , Partner-in-Charge , Tax
Based on current proposals to significantly cut back on estate and gift tax exemptions etc ., Sax ’ s Tax Department is working closely with business owners to put an estate tax plan in place to utilize the historically high lifetime exemption of $ 11.7 million . With respect to the proposed increases on the income tax side , we are advising clients who are on a cash basis to consider accelerating income
and deferring expenses , where possible . For clients contemplating a sale of their business , we are encouraging them to close the transaction quickly , and if the sale is on an installment basis , to consider opting out and recognizing all gains in the current year if the tax increase is effective in 2022 . For clients who had net operating losses in 2020 , forgoing the carryback claim and carrying the losses forward could be more tax beneficial assuming cash flow is not an issue . With employees relocating during the pandemic , we are staying on top of businesses that could now have nexus in a new state resulting in additional income tax filings . And finally , with many states enacting the pass-through entity level tax , businesses should consider taking advantage of these provisions to save federal income tax . Although we anticipate tax law changes , the effective date is unclear , and therefore we are advising our clients to be ready to take quick action and be as flexible as possible with alternatives .
WilkinGuttenplan By Bill McDevitt , CPA , CVA . Shareholder
In response to President Biden ’ s proposal to increase taxes , our firm is suggesting our clients accelerate realization of transactions , that will result in long-term capital gains ; consider using their lifetime gift / estate exemption now ; accelerate 1031 exchanges ; and remain calm and focus on running and improving their businesses . I have seen enough of the
Continued On Page 24
The high cost of doing business in New Jersey is a factor for many owners and shareholders .
Photo : Getty Images / iStockphoto
Photo : Getty Images / iStockphoto
22 COMMERCE www . commercemagnj . com